US President Donald Trump has stated that he is considering a possible exemption for Australia from the planned 25% tariffs on steel and aluminium imports. This potential exemption comes as Trump intensifies his trade actions globally. He explained that Australia’s situation is unique because the US has a trade surplus with the country.
What is a trade surplus?
A trade surplus occurs when a country exports more goods and services than it imports, meaning it sells more than it buys. This results in a positive balance of trade. A trade surplus can apply to the overall trade of a country or to the trade between two specific nations (bilateral trade). The opposite, a trade deficit, happens when a country imports more than it exports.
Does Australia have a trade surplus with the US?
Yes, the United States has a significant bilateral trade surplus with Australia. This is one of the few countries with which the US doesn’t experience a trade deficit. According to the Office of the United States Trade Representative, the US had an estimated goods and services trade surplus of $14.3 billion with Australia in 2023. Total US-Australia trade that year reached $47.1 billion.
By contrast, the US has a considerable trade deficit with China, which amounted to around $582.4 billion in 2024.
Scott French, a senior lecturer at the University of New South Wales’ School of Economics, noted that Trump tends to focus on bilateral trade surpluses and deficits, viewing them as indicators of success or failure in trade. However, economists typically argue that bilateral trade figures don’t always reveal the full picture.
While having a trade deficit isn’t inherently bad, French explained that it can signify foreign investments flowing into the country, much like borrowing money from a bank when households spend more than their income.
Why is Trump considering an exemption for Australia?
While no exemption has been confirmed yet, the Australian government has been in talks with the US regarding the possibility of one. After a conversation with Prime Minister Anthony Albanese, Trump stated that there would be “no exceptions or exemptions,” but he also indicated that he would give “great consideration” to Australia’s situation due to its trade surplus with the US.
French pointed out that Australia’s trade surplus with the US, alongside its steel and aluminium exports, is a concrete argument to present to Trump. It demonstrates a mutually beneficial trade relationship that supports the case for an exemption. However, he also acknowledged that an economist might approach the situation from a different angle.
Treasurer Jim Chalmers added that Albanese effectively argued Australia’s case, emphasizing the mutual benefits of the economic relationship. This positive interaction suggests that the matter is still under consideration. In a similar scenario during Trump’s previous term, it took four months before Australia secured an assurance that an exemption could be granted, with the final decision coming about a year later.
What is a tariff?
A tariff is a tax imposed on imported goods or services. It makes imports more expensive, thus serving as a trade barrier. President Trump has reinstated a full 25% tariff on steel and increased tariffs on aluminium imports, which will be enforced starting March 12.
For example, if a company like Ford purchases steel from Canada, it will need to pay 25% more for it due to the tariff. This gives an advantage to domestic steel producers but also raises the prices of steel-based products, making them more expensive for consumers.
In the past, countries such as Australia, Argentina, Brazil, Canada, Japan, Mexico, South Korea, the European Union, Ukraine, and the UK were exempted from these tariffs. However, Trump argued that these exemptions allowed countries like China to exploit loopholes, undermining the effectiveness of the tariff policy.